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1 CUSTOMERS SATISFACTION WIHT ONLINE CUSTOMER SERVICE ON INTERNET BANKING OF SIAM COMMERCIAL BANK Chapter 1 Introduction The first Chapter is this thesis introduces the motivation of the selected area. Followed by background of the research, research problems and the purpose of the thesis that will help reader to understand the insight of the research area. In the end of the first chapter we will also present the disposition of the thesis. 1.1 Motivation As we enter the digital era, the economy, technology, society and business are changed. This change has affected not only the fundamental business principle but also everything in our society-- for instance, electronic-based system, electronic business (e-business), electronic commerce (e-commerce) and electronic government (e-government). Electronic-based banking systems such as banking telephone system, Automatic Teller Machine (ATM), Electronic Fund Transfer (EFT), digital signatures, smart cards and Internet Banking. These above are all playing important roles in most of the banks over the world. In the middle of 2006, around 1,000 million people have accessed to the Internet 1. This is about 16 percent of the world population (2006 estimates). The numbers of member using Internet grew rapidly around 189 percent during year In Thailand, the numbers of Internet users are around 8.4 million, equal to Internet World Stats Usage and Populations Statistics, updated Sept. 18,

2 percentage penetration on March (See figure 1-1) It increased by 1.45 million people, equal to 20 percent, compared with the figures at the end of Nevertheless, Internet users are centralized in the capital city, Bangkok, and other big cities (NECTEC, 2005). With the continuous Internet spread and its further applications, the adoption of information technologies (IT) by enterprises and firms is also growing. Figure 1-1: Number of Internet Users in Thailand Source: National Statistical Office (NSO), The unbelievable growth of the Internet has been changing the way corporations performed business. The Internet offered a wide range of opportunities for companies to find new ways of conducting their business, to cope with increased competition more efficiently and effectively. As a result, business practices through Internet are increasingly becoming the subject of studies that applied to evaluate the impact of Internet on economic growth and business performance (Venkatraman, 2000). 2 Internet usage in Thailand, Internet World Stats Usage and Populations Statistic, updated Mar, Internet User in Thailand, updated Sept. 1,

3 1.2 Background Characteristics of the Thai retail banking industry Dr. Chaisomphol Chaoprasert & Dr. Barry Elsey (2004) described some characteristics of retail Thai banking different from those of banking in other countries. These aspects, as well as the similarities, are detailed below. Banks that originate in Thailand fall into three categories. - The first group consists of five banks of which the major shareholders are Thai investors, individuals and institutions. - The second group is four hybrid or international Thai banks, which came to be owned predominantly by foreign shareholders, especially foreign banks, during the Thai economic crisis in 1998 (Pukapan & Trisatienpong, 2001, pp. 280). - The third group comprises three government-owned banks of which the operations mirror government policies. The 15 banks 4 are listed in Table 4-2. Competition in the Thai market increased remarkably after the entrance of the international banks (Pukapan & Trisatienpong, 2001). Now, although the five Thai and three government-owned banks are more familiar to customers, with many branches across the nation, the international banks are increasingly offering ready-made products and using advanced technology. Their greater management skill means changes can be introduced promptly to the market, while their competitors face higher branch investment and operating costs. The Thai banking industry, while quite small with only 15 commercial banks, still provides a branch banking system with a large number of branches nationwide creating an economic driving tool (Pukapan & Trisatienpong, 2001, 4 Number of Commercial Banks' Branches, Bank of Thailand, updated Sept,

4 pp. 41). In September 2006, there were 4,592 branches 5 and these were the main contact points for Thai customers, especially those in urban areas. Table 1-1 : Group of commercial banks in Thailand Thai Banks 1. BANGKOK BANK PUBLIC COMPANY LTD THE SIAM COMMERCIAL BANK PUBLIC COMPANY LTD KASIKORNBANK PUBLIC COMPANY LTD TMB BANK PUBLIC COMPANY LTD BANK OF AYUDHYA PUBLIC COMPANY LTD THANACHART BANK PUBLIC COMPANY LTD TISCO BANK PUBLIC COMPANY LTD KIATNAKIN BANK PUBLIC COMPANY LTD. Source: Bank of Thai (2006), the numbers of groups of commercial banks in Thailand 5 Ibid, Bank of Thailand. 4

5 Table 1-1 : Group of commercial banks in Thailand (cont.) International Banks 1. ACL BANK PUBLIC COMPANY LTD UNITED OVERSEAS BANK (THAI) PUBLIC COMPANY LTD STANDARD CHARTERED BANK (THAI) PUBLIC COMPANY LTD MEGA INTERNATIONAL COMMERCIAL BANK PUBLIC COMPANY LTD. Government-owned Banks 1. KRUNG THAI BANK PUBLIC COMPANY LTD SIAM CITY BANK PUBLIC COMPANY LTD BANKTHAI PUBLIC COMPANY LTD. Source: Bank of Thai (2006), the numbers of groups of commercial banks in Thailand The behavior of Thai consumers may be different and distinctive from others. Specifically, Thais prefer the personal touch in service. They contact familiar bank staff because they believe their needs are understood and good relationships are developed with them. Conversely, many customers are neither able to understand nor confident in using self-service machines. 5

6 1.2.2 Internet banking service Internet banking allows customers to perform a wide range of banking transactions electronically via the bank s Web site. When first introduced, Internet banking was used mainly as an information presentation medium in which banks marketed their products and services on their Web sites. With the development of asynchronous technologies and secured electronic transaction technologies, however, more banks have come forward to use Internet banking both as a transactional as well as an informational medium. As a result, registered Internet banking users can now perform common banking transactions such as writing checks, paying bills, transferring funds, printing statements, and inquiring about account balances. Moreover, many new Internet banking services have been initiated such as, e-banking centers, e-atms, e-phone banking, e-cash cards and e-saving account etc. Internet banking has evolved into a one stop service and information unit that promises great benefits to both banks and consumers (Margaret & Thompson, 2000). Internet banking products and services can include wholesale products for corporate customers as well as retail and fiduciary products for consumers. Ultimately, the products and services obtained through Internet banking may mirror products and services offered through other bank delivery channels. Some examples of wholesale products and services include: Cash management. Wire transfer. Automated clearinghouse (ACH) transactions. Bill presentment and payment. Examples of retail and fiduciary products and services include: Balance inquiry. Funds transfer. Downloading transaction information. Bill presentment and payment. 6

7 Loan applications. Investment activity. Other value-added services. Growth in Internet Banking Numerous factors, including competitive cost, customer service, and demographic considerations, are motivating banks to evaluate their technology and assess their electronic commerce and Internet banking strategies. Many researchers expect rapid growth in customers using online banking products and services. Competition the competitive pressure is the chief driving force behind increasing use of Internet banking technology, ranking ahead of cost reduction and revenue enhancement, in second and third place respectively. Banks see Internet banking as a way to keep existing customers and attract new ones to the bank. Geographical Reach Internet banking allows expanded customer contact through increased geographical reach and lower cost delivery channels. In fact some banks are doing business exclusively via the Internet they do not have traditional banking offices and only reach their customers online. Other financial institutions are using the Internet as an alternative delivery channel to reach existing customers and attract new customers. Branding Relationship building is a strategic priority for many national banks. Internet banking technology and products can provide a means for national banks to develop and maintain an ongoing relationship with their customers by offering easy access to a broad array of products and services. By capitalizing on brand identification and by providing a broad array of financial services, banks hope to build customer loyalty, cross-sell, and enhance repeat business. Customer Demographics Internet banking allows national banks to offer a wide array of options to their banking customers. Some customers will rely on traditional branches to conduct their banking business. For many, this is the most comfortable way for them to transact their banking business. Those customers place a premium on person-to-person contact. Other customers are early 7

8 adopters of new technologies that arrive in the marketplace. These customers were the first to obtain PCs and the first to employ them in conducting their banking business. The demographics of banking customers will continue to change. The challenge to national banks is to understand their customer base and find the right mix of delivery channels to deliver products and services profitably to their various market segments. Type of Internet Banking Informational this is the elementary of Internet banking. Typically, the bank has marketing information about the bank s products and services on a standalone server. This level of Internet banking can be provided by the bank or outsourced. While the risk to a bank is relatively low, the server or Web site may be vulnerable to alteration. Appropriate controls therefore must be in place to prevent unauthorized alterations to the bank s server or Web site. Communicative this type of Internet banking system allows some interaction between the bank s systems and the customer. The interaction may be limited to e- mail, account inquiry, loan applications, or static file updates (name and address changes). Because these servers may have a path to the bank s internal networks, the risk is higher with this configuration than with informational systems. Appropriate controls need to be in place to prevent, monitor, and alert management of any unauthorized attempt to access the bank s internal networks and computer systems. Virus controls also become much more critical in this environment. Transactional this level of Internet banking allows customers to execute transactions. Since a path typically exists between the server and the bank s or outsourcer s internal network, this is the highest risk architecture and must have the strongest controls. Customer transactions can include accessing accounts, paying bills, transferring funds, etc

9 1.2.3 Internet banking in Thailand The internet banking service has been implemented in Thailand since Because of high rate of NPL (Non Performing Loans), economic crisis on-hand since 1997, many Thai banks are forced to reduce cost and compete with foreign banks by providing better service. Consequently, starting from late 2000, many banks in Thailand have been encouraged in initiation, preparation and transformation from electronic-based banking service to Internet Banking as a new online service channel. The first four Thai banks (Thai Farmers Bank (TFB), Siam Commercial Bank (SCB), Bank of Asia (BOA) and KrungThai Bank (KTB) have decided to initiate, explore and attempt to launch Internet banking service as a mean to reduce waiting time, errors, and costs and improve customer satisfaction since (Ongkasuwan and Tantichattanon, 2002). Nowadays, internet banking becomes well-known in Thailand, although the system is still not complete and efficient. Many banks in Thailand began to invest and develop their own internet banking. There are many new service across banks have been implemented through internet banking systems, such as checking account balances, requesting statements, transferring money, paying loans / bills / taxes, foreign exchange and remittance, trade, international/global fund transferring, and stopping check (Rotchanakitumnuai and Speece, 2004). Customers also gain benefits from Internet banking. Turban et al. (2002) indicates that Internet banking is extremely beneficial to consumers because of the saving in costs, time and space it offers, its quick response to complaints, and its delivery of improved services, all of which benefits make for easier banking. As the result, transactional Internet banking in Thailand has increased tremendously in 2002 (see figure 1-2). 9

10 Figure 1-2 : Value and Volume of Internet banking Transaction in Thailand Source: Bank of Thailand (BOT), (2006). Marketing is defined as the process of management to identify, anticipate and satisfy customer requirements profitably. It shows that today s companies have moved their focuses from products and sales to customers oriented marketing (Lin, 2003) With the continuous growth of competition in the marketplace, understanding customers has become an ever important issue of marketing. Offering the Internet for commercial purposes also requires that the level of service provided to customers remain much the same as is provided from a sales force in traditional marketing (Gurau et al., 2001). Both the practitioners and academics are keen on accurately measuring server quality so as to better understand its essential antecedents and consequences, and ultimately, establish methods for improving quality to achieve competitive advantage and build customer satisfaction (Palmer and Cole, 1995). Customer service can be improved by using web applications to identify and report problems more quickly, and allow more accurate diagnosis and faster responses to firms customers (Rotchanakitumnuai and Speece, 2004). Since customer expectation 10

11 and perception of internet service will change over time, quality will become a more important issue. Therefore, understanding service quality within the delivery channel of Internet becomes more and more important (Mols, 2000). Many companies have succeeded in using web-based business to implement innovative services for their customers (Lederer, Mirchandani and Sims 2001) and they have the efficient channel to respond to the customer needs such as, provided products information, doing transaction and solving problems quickly, etc. Thus the customer service is one of the key factors that support the internet banking to achieve the service efficiency. Businesses with good customer services, can identify their customers attitude more efficiently, and they will find out the direction to improve or create new policy for raising number of customers, expanding customer transactions and sustaining the customer loyalty. The banking industry is no exception. The introduction and customer acceptance of Internet-based home banking may bring a dramatic change in the way retail banks build and maintain close relationship with their customer (Jun and Cai, 2001). The reason of choosing Siam Commercial Bank as study object are the Siam Commercial has been ranked the second of Internet banking service in Thailand (Ongkasuwan &Tantichattanon 2002), and Siam Commercial Bank also have full implementation of both internet banking service and online customer service. Because this study conduct about the customer satisfaction with online customer service, so the researcher chose the object that provide the full online services like Siam Commercial Bank, instead of the first ranked of Internet banking in Thailand, but have not provide the complete online customer service yet. Moreover, Siam Commercial Bank is one of the top fourth Thai banks by market capitalization. 11

12 1.3 Statement of Problems According to the above discussion, the online customer service is one of the important factors that could raise the new customer transactions, as well as pursue the old customers to expand their transactions through the internet banking. Therefore, this research is to study the following questions: 1. How do customers evaluate the service quality in online customer service on internet banking of Siam Commercial Bank.? 2. What are the influential factors of customer satisfaction with online customer service of Siam Commercial Bank? 3. How does customer satisfaction with online customer service influence customer loyalty of internet banking of Siam Commercial bank? 1.4 Purpose of the research Since little previous research has focused on the online customer satisfaction delivered by the online banking in Thailand, this research aim to shad some light on this area. Hopefully this study will result in a clearer picture of the service quality dimensions of online customer service and the factors that affect the customer satisfactions Finally, through this study I hope to increase the knowledge of the way that customer satisfaction influence the customer loyalty to the internet banking of Siam Commercial Bank. 1.5 Organization of the thesis This thesis is divided into five chapters. The first chapter presents the motivation, background and purpose of the selected area which are followed by research questions. In chapter two theories and previous studies and some information related to topic will be presented. In chapter three frame of reference will be developed based on the literature review and is followed by the methodology used in this thesis. Chapter four contains an analysis of the empirical data. In chapter five, it presents the conclusion and recommendation for the bank. Moreover, it presents the limitation of the research and implication for further research. 12

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